Trump v. Fed, Who Will Win?

China, Russia, even ISIS, might be child-play for the chess master, but in Fed he may have met his match as Trump’s promise to drain the swamp may now lead to the biggest showdown yet.

“The problem I have is with the Fed. The Fed is going wild. I mean, I don’t know what their problem is that they are raising interest rates and it’s ridiculous,” Trump said during a telephone interview with Fox host Shannon Bream, before adding:

“The problem [causing the market drop] in my opinion is Treasury and the Fed. The Fed is going loco and there’s no reason for them to do it. I’m not happy about it.”

Just hours beforehand he called Fed crazy. “I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy,” he said.

He’s now apparently been briefed on Wednesday’s stock market action. “This is a bull market correction. It’s probably healthy. This will pass and the U.S. economy remains strong,” a White House official said, according to a statement read by CNBC.

Trump, however, is now lumping the treasury together with the fed. Treasury Secretary Steven Mnuchin has previously defended Fed’s independence and has now come out to defend the Fed again after Trump called them crazy, with Mnuchin saying he doesn’t think it was Fed’s fault. “Markets go up. Markets go down,” Mnuchin said.

“Interest rates are still accommodative, but we’re gradually moving to a place where they will be neutral,” Jerome Powell, Fed chair, said. “We may go past neutral, but we’re a long way from neutral at this point, probably.”

They have raised interest rates eight times in the past two years, bringing them above core inflation of 2% for the first time in a decade.

Powell has recently been raising interest rates every quarter, raising them in June and September. Many expect another hike later this year, and then probably up and up for every quarter of 2019 in an echo of Greenspan’s disastrous blunder which crashed the economy in 2008 following Greenspan’s speedy rate rises into 2006.

“Global central banks should keep lifting interest rates toward pre-crisis levels so that they have room to cut should another recession strike, Bank for International Settlements [BIS] General Manager Agustin Carstens said,” according to Bloomberg.

BIS is the banker of central banks, or in popular folklore, laluminatus. When central banks make payments between each other, they do so through BIS.

Central bankers across the world moreover meet in secret at BIS behind closed doors. There they decide such mundane matters as directing all central banks to say crypto-assets, rather than cryptocurrency, and presumably other far more important matters.

Through this global coordination they in effect make policy which can subvert decisions by the elected. In this case Trump, who is clearly hinting in his simple language he uses for the five second tv slot that Fed has gotten political and may be out to undermine him.

They don’t have to go so fast in raising interest rates, Trump said on Wednesday, but BIS is telling Fed to bring interest rates to pre-crisis levels, which would mean 5%-6%.

They call it normalization, but there is nothing normal about credit card interest rates breaking all records. Nor is there anything normal about the astounding levels of government debt which is now growing at $1 trillion a year and soon it may be $2 trillion.

Almost all the deficit is going towards paying the interest on that $21 trillion debt. With the picture repeating across the private sector which too is deep in debt, and now may be more so following these racy interest rate hikes.

They can instead raise capital requirements for banks, so easily tackling inflation by cutting the amount of loans banks can make, but then banks partially own the fed so they instead go for interest rates, forcing us all to pay more for the money they created out of thin air.

Nor is there anything normal about wages still not rising to even meet inflation, let alone at a rate where working people can actually feel wealthier.

The only thing “normal” here is the repeat of the central bankers’ ploy which is currently playing by the book. You first lower interest rates, get them all in debt, then quickly raise them until they can’t bear it any longer so that the fat bankers can swim in profits out of thin air while crashing the economy, and then repeat.

Head or tail bankers can’t lose here. When the economy is good they can enjoy their $10 billion a year profits sent mostly to their executives and in lavish spending, then when the economy can no longer handle the interest levels on debt, bankers can just nationalize their debt and leave the rest to hold the bag.

The question no one is asking moreover, is where is this interest rate going to? There are better things we can do with all that money, Trump said, so he probably knows. Yet he does not have any say, nor does the public have any say, on just what the interest rate should be. Something that affects our economy far more than anything else.

What’s more, not only does the elected have no say, but Trump is being told by the media attack dogs to shut up because fed independence.

Well maybe the fed shouldn’t be so independent when they’re making such massive decisions that affects the life of everyone. Maybe the set-up of this century old institution should be revised. Maybe there should be some public input, some accountability.

The president can not even fire the chair of the federal reserve without cause. What cause means isn’t clear, but generally the courts interpret it as in effect whether they’ve gone crazy, whether they’ve taken such an inappropriate action that no fed chair would.

That’s a high bar, which translates to Fed being above any accountability whatever. Above congress, above the president, above the people.

That’s in theory, of course, in practice there aren’t many checks and balances to a constitutional crisis, but that’s something no one wants as a debate on Fed and its role may be far preferred considering Fed has failed throughout the 100 years it has operated, will fail and must fail because they can not possibly know just what is the right price of bread, something that is indirectly and at times directly determined by the interest rate.

At the very least there should be public input on these decisions and maybe at times Congress should have the right to approve or reject them.

Otherwise fed has ultimate power, and as we all know, absolute power corrupts absolutely.

Trump’s strategy of roaring like a lion to warn has worked before, but whether fed will heed the warnings, or whether it will instead consider itself to be above the president, remains to be seen.

These however might be just symptoms. The cause is probably these century old laws and these century old institutions that were set-up to serve a different economy and a different world.

They need fundamental reform, from what parts of the economy they can oversee, what decisions they can make, to just how they can make such decisions, who does so, and who/what keeps them accountable.

That’s a monumental task that needs a great thinker, but then nearly a century has passed since there was one, so maybe someone will rise to end this bankers’ cycle of booms and busts.

Although one can argue Satoshi Nakamoto was the great thinker with cryptos the solution, and although he did not tweet yesterday, the stock market sort of did.